'Thank' Congress for new debit fees

October 6th, 2011 in Opinion Free Press

Nobody particularly enjoys paying new or higher fees for anything. But when debit card users start having to pay monthly fees to use the cards, they should place the blame precisely where it belongs: on Congress. That's because Congress created the conditions that brought about the new fees.

Congress assumed that it was doing consumers a favor when it passed a bill that reduced roughly by half the amount that banks can charge merchants for debit card transactions -- so-called "swipe fees."

But this misguided attempt at price controls has backfired royally. Banks are anticipating losses of billions of dollars because of Congress' meddling. So to make up for those huge losses, many banks have resorted to imposing monthly fees for their customers to use their debit cards in the first place. The fees vary from bank to bank, but at some banks, they will amount to about $60 a year for regular users of debit cards.

In short, Congress did not "control prices" for consumers; it only shuffled those prices around.

Consumers are understandably upset about the monthly fees for using their debit cards. But the fault lies with Congress for meddling and attempting to set prices, instead of allowing the market to determine prices.

Will Washington ever learn that even its best-intended manipulation of the economy is no substitute for the "invisible hand" of the free market?